Australia's Prime Minister has said there are "some indications" that the siege at a Sydney cafe could be politically motivated.
However, he added that the exact motivation is yet to be established.
Speaking at a news conference in Canberra, Tony Abbott said: "We have to appreciate that even in a society such as ours there are people who would wish to do us harm.
"That's why we have police and security organisations of the utmost professionalism that are ready and able to respond to a whole range of situations and contingencies including the situation that we are now seeing in Sydney.
"The whole point of politically motivated violence is to scare people out of being themselves. Australia is a peaceful, open and generous society. Nothing should ever change that and that is why I would urge all Australians today to go about their business as usual.
"Of course if anyone does have any suspicions of untoward activity, there is the national security hotline, 1800-123-400, which I would urge them to call."
He added: "Our thoughts and prayers must above all go out to the individuals who are caught up in this.
"I can think of almost nothing more distressing or terrifying than to be caught up in such a situation, and our hearts go out to those people."
New South Wales Police also urged people to "go about their daily business as usual".
"The message at the moment is that you should continue your business as usual. If you had plans to go into the city you should go about your plans as usual," said deputy commissioner Catherine Burn.
Britain's Prime Minister David Cameron gave his reaction on Twitter, saying: "I was briefed overnight on the siege in Sydney. It's deeply concerning and my thoughts are with all those caught up in it."
Several hours before armed officers surrounded the Lindt Chocolat Cafe in Martin Place, police announced a man had been arrested in the city as part of investigations into the planning of an attack in Australia.
They said the 25-year-old was seized as part of "continuing investigations into the planning of a terrorist attack on Australian soil and the facilitation of travel of Australian citizens to Syria to engage in armed combat".
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Gallery: Latest Images From Australia
Two hostages run for cover behind a policeman during a hostage siege in the central business district of Sydney
A woman runs for freedom from Sydney's Lindt chocolate shop and cafe in Martin Place
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